Simultaneous offers and the inefficiency of bargaining: A two-period example

Eddie Dekel*

*Corresponding author for this work

Research output: Contribution to journalArticle

11 Scopus citations

Abstract

It is shown that the Pareto optimal outcomes in a two period simultaneous move bargaining model violate forwards induction rationality when the players are sufficiently patient. This bargaining model describes a situation where a principal is represented by an agent whose flexibility is restricted. Hence, a bargaining process with such agents can create costly delays. The result also provides another example of the power of forwards induction and stability.

Original languageEnglish (US)
Pages (from-to)300-308
Number of pages9
JournalJournal of Economic Theory
Volume50
Issue number2
DOIs
StatePublished - Apr 1990

ASJC Scopus subject areas

  • Economics and Econometrics

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